A blog maintained by the team working to hold
oil giant Chevron accountable for its human rights
and environmental abuses in Ecuador

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Friday, September 28, 2012

Want a good example of how the lawyers at Gibson Dunn & Crutcher rip off their wealthy client Chevron?

It is becoming increasingly obvious that Chevron CEO John Watson and General Counsel R. Hewitt Pate are unable to stop the Gibson Dunn "rescue team" from squandering shareholder money to flout the company’s $19 billion environmental liability in Ecuador.

In a sickening example of overkill that might explain why people hate the legal profession, Chevron recently reported that it has employed 41 different law firmsand almost 500 lawyers and legal assistants to fight the indigenous groups in Ecuador. These groups -- including the Cofan, Secoya, and Siona -- have been victimized by Chevron's deliberate dumping of billions of gallons of toxic waste into the precious Amazon ecoysystem that the tribes depend on for their survival.

In New York federal court this week, Gibson Dunn sent 11 lawyers to a relatively inconsequential hearing on a subpoena given to a non-party in its far-fetched “RICO” conspiracy case against the indigenous groups and their lawyers who are fighting to hold Chevron accountable.

The firm dispatched five high-billing partners from various offices around the country – Randy Mastro (New York), Lauren Elliott (New York), Peter Selig (Washington, D.C.), William Thomson (Los Angeles), and Richard Mark (New York) – along with six other associates.

It was only Mastro, however, who stood up and argued to Judge Lewis A. Kaplan while the others seemed to sit around churning their billable hours while occasionally giving Mastro a cite to the record, a task any secretary could do.

Gibson Dunn obviously has some underutilized senior partners trying to jack up their billable hours at the expense of Chevron shareholders.

Let’s run the numbers.

Five partners, billing an average rate of $800 per hour, amounts to $4000 per hour. The hearing took several hours over two days, not to mention significant preparation time, travel time, and the writing of the subpoena itself. The six associates probably billed an average of $400 an hour to sit in the gallery and essentially do little but fetch coffee while watching the proceedings.

That’s roughly $6,400 per hour billed to Chevron shareholders for doing a whole lot of nothing. The entire proceeding easily could have been handled by Mastro and one associate.
This reminds us of how 10-20 Chevron lawyers and technical staff would show up to watch American lawyer Steven Donziger be deposed for 15 days in 2010 and 2011. One person would ask questions, while the rest would watch. Various other Chevron lawyers around the country would bill for watching a live internet stream of Donziger’s testimony.

The total bill for that exercise in overkill was at least $100,000 per day.

Chevron admitted it polluted Ecuador, but it claims it spent $40 million on a “remediation” that was nothing more than a fraudulent cover-up of its toxic waste pits. In the meantime, Chevron has spent an estimated $1 billion on its defense in the case, with Gibson Dunn’s per-partner profits in 2010 jumping 20% during a sharp downturn in the legal profession -- largely because of the wasteful billing practices that we saw this week in New York.

Chevron shareholders should not expect CEO Watson and top lawyer Pate to do much about safeguarding the company's assets when it comes to the Ecuador gamble. They double down on the company's increasingly futile defense almost weekly, so it means little to squander another $100,000 of shareholder money on a day in court so Mastro can renovate his house in the Hamptons over the winter.

With waste like this and the increasing risk that billions of dollars worth of Chevron assets around the world will be seized, expect an even more forceful push by shareholders against Watson next year.

Thursday, September 27, 2012

Fortune writer Roger Parloff has used dishonest reporting to help Chevron cover its tracks in the wake of its horrific human rights disaster in Ecuador – a disaster where Chevron admitted that predecessor company Texaco deliberately dumped more than 16 billion gallons of toxic waste into the water supply of rainforest indigenous groups as a cost-saving measure, and then tried to cover up this crime with a sham remediation and attempted bribes to the Ecuadorian government to kill off the lawsuit seeking compensation.

If Chevron’s executives had pulled this stunt in the U.S. and our citizens were the victims, they likely would have landed in jail. Certainly there would be a multi-billion fine – see BP, which faces a $40 billion liability for the far smaller Deepwater Horizon disaster in the Gulf of Mexico.

But in Ecuador, Chevron has gotten off relatively easy – a $19 billion judgment after an eight-year trial but no criminal charges for top executives related to their cover-up of the world’s worst oil-related ecological problem. Evidence shows the dumping was part of a deliberate plan to enrich Chevron shareholders at the expense of the health of the local population, which has suffered an epidemic of cancers and other oil-related diseases. Chevron wanted the case tried in Ecuador and moved it there from U.S. federal court,claiming repeatedly that Ecuador has a fair judicial system – a fact confirmed by prominent experts.

Given that a prominent American oil company was found liable for this type of gross misconduct – no less a company under the cloud of another criminal investigation in the U.S. forillegal toxic gas flaring at its San Francisco-area refinery-- one would think Parloff would treat Chevron’s latest claims with at least the basic level of skepticism taught to college freshmen in Journalism 101.

Instead, Parloff’s latest 5,000-word blog repeats almost word for word Chevron’s fake narrative. He hides behind Chevron legal papers to claim the venerable U.S. law firm Patton Boggs tried to cover up a fraud in Ecuador. The blog is exhausting to read, but it is a fabulous case study in dishonest reporting that should leave Fortune editors and Time Warner executives shaking their heads.

Parloff fails to report – even as opinion -- that Chevron’s fundamental narrative is false: Patton Boggs never tried to “cover up” a fraud because there was no fraud by the plaintiffs in Ecuador. There is extensive evidence of a massive environmental crime and fraudulent cover-up by Chevron in Ecuador, but Parloff didn’t touch that evidence even though it is readily available in thousands of pages of legal papers, is summarized in the 188-page Ecuador court judgment, and he has been told about it repeatedly by representatives of the plaintiffs.

The fact Parloff fell far short in his ethical duties as a journalist is undeniable.

First, Parloff never called Karen Hinton, the spokesperson for the plaintiffs, to get the other side of the story. He never mentioned (much less reported the details of) U.S. lawyer Steven Donziger’s devastating counterclaim against Chevron recently filed in U.S. federal court, that in 214 meticulous paragraphs puts the lie to Chevron’s fake narrative. He also never cited in any depth to any of the thousands of pages of legal briefs filed by the plaintiffs and Donziger in Ecuadorian and U.S. courts disputing ever aspect of Chevron’s allegations.

Parloff never reported that the relatively inconsequential “hearing” on the Patton Boggs subpoena (which was the “news hook” for Parloff to repeat Chevron’s fake narrative and go after Patton Boggs in his blog) – which is related to the equally far-fetched “RICO” case Chevron filed against Donziger and his colleagues -- is being conducted by none other than federal judge Lewis A. Kaplan, whose earlier work on the Ecuador case was vacated by the Second Circuit Court of Appeals and who has been widely discredited for his blatant personal biases against the Ecuadorians, documented in this legal brief.

Parloff also stripped his story of vitally relevant context that demonstrates that Chevron is clearly on the ropes in the case.

Consider:

**Because it flouts the rule of law in Ecuador, Chevron now faces something much worse -- seizure actions against billions of dollars of strategic company assets in Canada and Brazil. These actions, in the words of Chevron Deputy Comptroller Rex Mitchell, will cause“irreparable harm”to company operations and disrupt Chevron’s global supply chain. Chevron is fast approaching a point where it won’t be able to invest in several countries because of the risk its investments could be seized to pay the Ecuador judgment. This is unprecedented in the annals of American business, yet neither Parloff nor Fortune has ever reported this aspect of the story.

**Chevron shareholders are in open rebellion against company management for its mishandling of the Ecuador case, to the point where CEO John Watson’s ability to continue as Chairman of the Chevron’s Board is injeopardy. Again, silence from Parloff.

**Fair Pension, a London-based shareholder advocacy organization, just issued a blistering report documenting how Chevron is under increasing pressure from shareholders and the media because of the $19 billion judgment. Again, Parloff's fingers apparently seized up at the keyboard.

**Chevron’s lead outside law firm, Gibson Dunn & Crutcher, has been caught engaging in unethical behavior on behalf of Chevron in Ecuador and the U.S. and is engaged in ablatant intimidation campaign against any lawyer who wishes to help the Ecuadorians. Recently, several lawyers reportedly left the firm rather than continue to do Chevron’s bidding on the case. Again, nothing from Roger.

The absurdity of trying to tar strong and experienced lawyers like Jim Tyrell of Patton Boggs with defamatory allegations is a joke. A law firm like Patton Boggs -- with former Republican Senator Trent Lott as a partner and Douglas Ginsberg, the Republic Party’s go-to election law guru as a leading light -- would not work for three years on a case if it thought there was even a shred of possibility that it was doing anything improper.

How does Parloff explain all of the other prominent law firms who have rallied to the cause of the plaintiffs and their lawyers? Apart from Patton Boggs, you have Lenczner Slaght in Toronto, Sergio Bermudes in Brazil, Keker Van Nest in San Francisco, Smyser Kaplan & Veselka in Houston, and Miranda & Amado in Lima.
All are firms with major corporate clients who enjoy the highest reputations for integrity, unlike the chaps Chevron has bedded over at Gibson Dunn.

Parloff let himself be used to advance Chevron’s unsavory, unethical and un-American campaign to deny legal representation to vulnerable peoples because the company knows it cannot win the case on the merits.

Donziger’s lawsuit documents in chilling detail how Chevron’s own internal audits and expert analyses confirm the claims of the Ecuadorian indigenous communities – and that Chevron, faced with losing the Ecuador case, “decided to fraudulently vilify both the Ecuadorian judiciary and the lawyers” by fabricating evidence, lying about the scientific data, and “leveling false and misleading claims of fraud and other misconduct”.

Parloff also ignores the fact that Chevron’s own internal reports – by Fugro McClelland and HBT Agra – concluded there was massive toxic contamination at every one of the company’s well sites when it left Ecuador in the early 1990s. (Chevron operated in Ecuador from 1964 to 1992.) There was also no mention that Chevron produced thousands of scientific sampling results in the Ecuador trial that found levels of contamination for 15 toxic chemicals well above legal limits at 97% of the 93 Chevron well sites inspected.

Also missing from Parloff’s article is the extensive evidence of Chevron’s attempts to illegally sabotage the judicial proceedings in Ecuador with pressure, bribes, threats against judges, cooked evidence, and the like. These acts are extensively documented in the sworn affidavit of Ecuadorian lawyer Juan Pablo Saenz.(Chevron has never responded to most of the allegations in the Saenz affidavit.)

Despite the overwhelming evidence against Chevron, Parloff has the temerity to claim that Donziger has never advanced a “benign” explanation to contradict Chevron’s claims. Roger, first read Donziger’s counterclaim. Second, understand that the “uncontradicted” findings (which were always disputed) of Judge Kaplan have been thrown out along with the rest of that earlier case where a formerly reputable judge engaged in the sad spectacle of trying to put the entire judiciary of U.S. ally Ecuador on trial in his Manhattan courtroom.

To Parloff, it is just inconceivable that indigenous groups in the Amazon have had the temerity to hook up with powerful U.S. law firms like Patton Boggs. To Parloff and the folks at Chevron, it is even more outrageous that Patton Boggs and other lawyers might actually get paid for their efforts. Wow, the idea of poor people from the Amazon and American professionals hooking up to fight for justice is frightening. I mean, nobody should ever get paid for fighting for justice, much less poor people.

We surmise that Chevron and the Koch brothers right now are designing a campaign to prohibit American lawyers from getting paid for holding American companies accountable for their outrageous conduct abroad. Watch for Mitt Romney, the oil industry's favorite son, to unveil the issue during the first presidential debate.

In Parloff’s world, its OK for Chevron to have hired and paid hundreds of millions of dollars to its 41 law firms and roughly 500 lawyers being used to try to quash the claims of the Ecuadorian tribes. That’s just normal corporate behavior.

Magazines like Fortune and “reporters” like Parloff love the free market as long as it benefits their big advertisers or the very large companies they fawn over. But when dying indigenous groups use the free market to sell part of their last assets to secure strong legal representation – giving them a fighting change to protect their fundamental right to life -- suddenly the free market doesn’t seem so attractive.

We note for the record that neither Fortune nor Parloff seem to give a damn about the free market in Venezuela and Argentina, where Chevron is in deep cahoots with two governments that have expropriated foreign oil properties of Chevron competitors.

Wednesday, September 26, 2012

Amazon Watch's Eye on the Amazon blog hits the mark on why Chevron finds itself in trouble, facing serious investigations in its backyard, in Richmond, California, Ecuador, Brazil and in other countries across the world: Cash Money.

"It was a cold calculus based on one thing. Cash money. To save a couple bucks, Chevron designed an oil extraction on the cheap, using outdated technology that it knew would harm people and the planet. It wasn't a "mistake". It was premeditated, criminal intent. This was executives and engineers sitting around conferences tables, diagraming dangerous deeds on chalkboards, mapping out their crimes against humanity and ecosystems. [I can't confirm whether evil laughter took place, or whether these meetings were followed by long, extravagant Mad Men style lunches with stiff drinks, big steaks, and inappropriate flirting with secretaries. But it was the 1960s.]"

A U.S. federal magistrate judge in San Francisco is inexplicably sitting on documents that tie Chevron to attempts to corrupt the Ecuadorian judiciary to evade payment of a $19 billion liability related to the world's worst oil-related ecological disaster. The magistrate judge, Nathanael Cousins, has provided no good reason why he has waited more than one year to make a decision about whether to release hundreds of explosive documents from Chevron and the Mason Investigative Group. See the press release below.U.S. Judge Sits On Documents That Tie Chevron to Corruption In EcuadorAmazon Defense Coalition, 25 September 2012, Contact: Karen Hinton, 703-798-3109. Karen@hintoncommunications.com

San Francisco – A U.S. federal judge in San Francisco is inexplicably delaying the release of documents that would shed light on Chevron’s extensive misconduct in judicial proceedings in Ecuador where it recently was hit with a $19 billion judgment for dumping toxic waste into the Amazon rainforest.

More than a year has passed since Federal Magistrate Judge Nathanael Cousins was asked by rainforest villagers in Ecuador’s rainforestto force Chevron and the Mason Investigative Group to release hundreds of pages of material related to a scheme to bribe an Ecuadorian judge and undermine the court process there, said Karen Hinton, the U.S. spokesperson for the Ecuadorians.

More recently, the Republic of Ecuador – represented by the U.S. law firm Winston & Strawn – urged Cousins to release the documents, all to no avail. Cousins heard extensive argument on the issue more than a year ago and the documents have been on his desk for months pending decision.

“We believe Judge Cousins is sitting on a treasure trove of documents that will shed light on Chevron’s corrupt activities in Ecuador and are highly relevant to ongoing litigation,” said Hinton. “He should act immediately on these long-overdue requests.”

The government of Ecuador first asked for the documents in March 2011. That August, Northern California District Judge Charles Breyer ordered Chevron and the Mason Group to produce the documents.

When Chevron and the Mason Group claimed most of the documents were privileged, Judge Cousins was ordered to review them; his ruling has been pending ever since.

Documents that the plaintiffs are urging Cousins to release include:

**The contents of an IPhone from Chevron operative Diego Borja, believed to be held by Robert Mittelstaedt, a lawyer from Chevron law firm Jones Day in San Francisco. Borja has said the information on the phoneproves that Chevron “cooked evidence” during the trial and if released would allow the villagers to win the case “just like that”. See here.

**Emails and other materials that prove Borja was paid more than $2 million in hush money from Chevron to maintain his loyalty.

**Materials related to Wayne Hansen, a convicted felon used by Chevron to help Borja try to bribe a judge in Ecuador. With the help of the Mason Group, Hansen was moved from California to Peru, apparently to avoid being served with a subpoena. See this Courthouse News article.**Early drafts of an “affidavit” prepared by Borja that will prove that his later affidavit submitted to the court contains false information.

**Materials and correspondence that shows that Mittelstaedt and his partners managed the intimate details of Borja’s life after he mysteriously moved from Ecuador to the U.S., at Chevron’s expense, to evade an official investigation in his home country. Mittelstaedt, for example, took care of payments for Borja’s cell phone, plane tickets, rent, and furniture.

Chevron hired several powerhouse law firms to try to persuade Cousins to block release of the documents. Those firms include Arguedes, Cassman & Headley, Jones Day, and Boies Schiller.

“Clearly Chevron is willing to spend any amount necessary to prevent or to delay the release of these documents,” said Hinton.

The Republic of Ecuador, in aletterto Cousins sent in August, said it “is not only being denied the right to review the documents it has been seeking for over a year, but is unable to pursue necessary related discovery” for its arbitration case against Chevron.

Cousins was appointed to the federal judiciary in 2011. Before joining the Court, he was a federal prosecutor in the antitrust division of the Department of Justice – ironically, the same division that was formerly headed by Chevron’s current General Counsel, R. Hewitt Pate.

After an eight-year trial, Chevron in 2011 was found liable for deliberately dumping billions of gallons of toxic waste into Amazon waterways and forests to save on production costs. Evidence before the court showed the contamination caused an outbreak of cancer and decimated indigenous groups.

Having won their judgment, the Ecuadorians have filed asset seizure actions against Chevron in Canada and Brazil to force the company to abide by the Ecuador court ruling. The trial was held in Ecuador at Chevron’s request after originally being filed in U.S. court.

A video about Chevron’s human rights violations and fraudulent cover-up in the Ecuador can be seen here. A written summary of the evidence used to find Chevron liable can be seenhere.

Tuesday, September 25, 2012

More evidence of the cultural rot deep within Chevron’s management structure has surfaced with a devastating new report in the San Francisco Chronicle that the company is now under a criminal investigation for lying to authorities over toxic gas flaring at its Bay Area refinery. For Chevron CEO John Watson andGeneral Counsel R. Hewitt Patethe news could not have come at a worse time.

The Chronicle reported in Sunday’s editions that the U.S. Environmental Protection Agency is conducting a criminal investigation of Chevron after learning the company has installed pipes to re-route toxic pollutants around monitoring equipment at its Richmond refinery before burning them off into the atmosphere, where they pose a risk of cancer and respiratory ailments.

According to the Chronicle: “Air quality officials say Chevron fashioned a pipe inside its refinery that routed hydrocarbon gases around monitoring equipment and allowed them to be burned off without officials knowing about it.”

A local county supervisor, John Gioia, had the guts to be quoted on the record about what Chevron did: “That’s a criminal act, intentionally bypassing the monitoring,” Gioia said.

The criminal investigation started when two inspectors noticed that Chevron’s pollution-monitoring equipment wasn’t recording anything and became suspicious.

A fire at the Richmond refinery on Aug. 6, which forced thousands to area hospitals for treatment, is also under investigation and has led to a class action lawsuit against the company. See this Huffington Post piece for more details.

“Chevron's pattern of legal and environmental management failure reveals an executive team out of its depth and out of control. The board's lack of effective oversight of top management risks driving the company and its shareholders into the ground,” said Simon Billenness, an independent analyst who has followed the company's growing environmental liabilities.

Billenness also said a new analysis by the London-based group Fair Pension has revealed how Chevron’s approach to the Ecuador disasterthreatens shareholder value.

Our advice to the investigators: look at Chevron's corporate suites for the source of the problem, not just the line workers at the refinery who creatively figured out a way to save the company money at the expense of the health of local residents.

Workers cheat because of the existence of a corporate culture that encourages cheating, the effects of which the world has seen in Ecuador time and again. If you want to see what kind of corporate citizen really Chevron is, look at thisvideoabout its gross human rights violations in Ecuador.

Tuesday, September 11, 2012

Chevron’s lead outside lawyer on the Ecuador environmental litigation, Randy Mastro of Gibson Dunn & Crutcher, always plays fast and loose with the facts. His goal is to try to distract attention from Chevron’s human rights violations and fraudulent misconduct in Ecuador to cover-up the company’s leading role in creating the world’s worst oil-related environmental disaster. Now he has been caught in another outright deception, with U.S. courts as the victim.

Mastro likes to fashion himself as a former “mob prosecutor”. But that reality is far from the truth, given that he “served” in the civil division of the U.S. Attorney’s Office in the 1980s and therefore never prosecuted anybody. In fact, Mastro was considered a “weak link” in the office, according to a former colleague who spoke to the Chevron Pit.

Lies by Mastro and other Gibson Dunn lawyers such as Andrea Neuman and Kristin Hendricks about the Ecuadorians are notorious for causing ethical problems for Chevron as it desperately tries to avoid paying the $19 billion judgment imposed in Ecuador after an eight-year trial that produced more than 220,000 pages of record evidence documenting the company’s wrongdoing. See hereand here.

Mastro is the mastermind behind a long list of dirty tricks being played against the Ecuadorians after Chevron was found guilty for the dumping of billions of gallons of toxic waste into the water supply of the rainforest. See here andhere.

Mastro’s intent is clear: to use any means necessary to help Chevron stop enforcement of the Ecuador judgment by creating a fake narrative that the rainforest indigenous communities and their lawyers are greedy, corrupt and even violent.

Mastro and his minions at Gibson Dunn (including more than 60 lawyers working on the case and well over $100 million in annual billings) have waded through 600 hours of video outtakes from a documentary about the environmental disaster in Ecuador, called Crude. Mastro reduced the 600 hours to a few minutes of heavily edited and manipulated comments -- all as part of his effort to derail the historic lawsuit and, in the process, destroy the reputation of Steven Donziger, a lawyer who for almost two decades has fought in virtual anonymity on behalf of the rainforest communities victimized by Chevron.

This corporate defense tactic executed by Mastro is pretty simple – when your client commits massive crimes and fraud, you attack the lawyers and try to focus attention on anything but the merits of the case. Unlike Mastro, most lawyers who engage in this tawdry tactic are smart enough not to get entangled in their own lies.

Read how “mob prosecutor” Mastro has completely distorted the meaning of Donziger’s comments in the video outtakes before multiple U.S. courts (chronicled in greater detail on pages 137 to 143 of this document):

**In his typical preposterous way, Mastro in court papers accused Donziger of establishing an “armed army” to literally attack the Ecuador court with weapons. In fact, Donziger was trying to organize a lawful rally of his clients to press the court to resist Chevron’s corrupt strategy to delay the trial by drowning the court in papers and threatening judges with jail time. This illegal tactics had paralyzed the proceedings. In the full transcript – not the one Mastro submitted to U.S. courts – it is clear Donziger was engaging in completely lawful and appropriate behavior no different than any lawyer would do (or should do) if his clients were being corruptly denied a fair trial by an adversary.

 Mastro accused Donziger of saying that only politics and the press coverage mattered during the trial; that the trial itself was of no consequence. Donziger, however, was actually making a much different point: that the court had all the evidence it needed to convict Chevron, and that fact needed to be conveyed to political and press contacts. (Of course, the hypocrisy is astounding. Chevron is one of the largest political donors in this country and spends hundreds of millions every year hiring advertising and public relations firms to manage its tattered image here and abroad.)

The exact conversation on the video clearly shows Chevron and its General Counsel R. Hewitt Pate are paying Mastro to lie to U.S. judges. Mastro simply uses his willingness to cross the ethical line as an advantage in the highly competitive legal marketplace. Most companies would never buy this approach, but Chevron – a company just as arrogant as Mastro – feels entirely comfortable with the strategy.

Meanwhile, Donziger – a sole practitioner who works out of his apartment --is fighting back against Chevron’s intimidation tactics. He has filed claims against Chevron for lying to U.S. courts and engaging in extortion and fraud to cover up its crimes in Ecuador. See here and here.

In typical fashion, Chevron (led by Mastro) has desperately opposed Donziger’s claims, which completely destroy the company’s fake narrative. Mastro and Chevron CEO John Watson are obviously scared of the truth coming out. If it did, one would see that the company’s callous approach to Ecuador has resulted in numerous deaths and the wholesale destruction of indigenous communities.
It remains to be seen if the notoriously opinionated Judge Lewis A. Kaplan – who already has been reversed once by the Second Circuit Court of Appeals -- continues to buy into Mastro’s charade or lets Donziger’s claims proceed.